                                 CODE OF VIRGINIA

DISBURSEMENT FROM PRINCIPAL (§ 64.2-1065)

A. Subject to § 64.2-1068, and except as otherwise provided in subdivision C 2
of § 64.2-1071, a fiduciary shall disburse from principal:

   1. The balance of the disbursements described in subdivisions 1 and 3 of
   &#xA7; 64.2-1064, after application of subdivision 2 of &#xA7; 64.2-1064;

   2. The fiduciary&#8217;s compensation calculated on principal as a fee for
   acceptance, distribution, or termination;

   3. A payment of an expense to prepare for or execute a sale or other
   disposition of property;

   4. A payment on the principal of a trust debt;

   5. A payment of an expense of an accounting, judicial or nonjudicial
   proceeding, or other matter that involves primarily principal, including a
   proceeding to construe the terms of the trust or protect property;

   6. A payment of a premium for insurance, including title insurance, not
   described in subdivision 4 of &#xA7; 64.2-1064, of which the fiduciary is the
   owner and beneficiary;

   7. A payment of an estate or inheritance tax or other tax imposed because of
   the death of a decedent, including penalties, apportioned to the trust; and

   8. A payment:
   				a. Related to environmental matters, including:

      1. Reclamation;

      2. Assessing environmental conditions;

      3. Remedying and removing environmental contamination;

      4. Monitoring remedial activities and the release of substances;

      5. Preventing future releases of substances;

      6. Collecting amounts from persons liable or potentially liable for the
      costs of activities described in subdivisions (1) through (5);

      7. Penalties imposed under environmental laws or regulations;

      8. Other actions to comply with environmental laws or regulations;

      9. Statutory or common law claims by third parties; and

      10. Defending claims based on environmental matters; and
      					b. For a premium for insurance for matters described in subdivision a.

B. If a principal asset is encumbered with an obligation that requires income
from the asset to be paid directly to a creditor, the fiduciary shall transfer
from principal to income an amount equal to the income paid to the creditor in
reduction of the principal balance of the obligation.

C. Notwithstanding any other provision of law and unless the terms of the trust
provide to the contrary, a trustee may pay from the principal of the trust from
time to time (i) the federal or state income taxes, or both, imposed upon the
settlor on income of the trust that is not distributed to the settlor or (ii)
such amounts that are required to reimburse the settlor for any federal or state
income taxes, or both, imposed on the settlor on income of the trust that is not
distributed to the settlor. The trustee shall not have the power to make
payments pursuant to this subsection with respect to any trust where a
charitable income, estate, or gift tax deduction has been allowed, in whole or
in part, for the contributions to such trust if the exercise of such power would
limit or reduce the amount of such deduction.

HISTORY: 2022, c. 354.